UFP INDUSTRIES INC Q1 FY2025 earnings call

• The challenging macroenvironment continues, but recent business trends are improving sequentially. Operations are focused on cost-out programs with $60 million in structural cost savings targeted by 2026. - The portfolio is diversified, with new product sales at $106 million (6.7% of total sales) and a goal to reach 10% over time. Deckorators announced a new facility in the Northeast. - M&A pipeline is active, and share repurchases have been ongoing with a $100 million authorization from the board. - Focus remains on value-add products, innovation, margin expansion, and monitoring expenses and plant network.

Retail segment sales were $607 million, a 3% decline year-over-year due to a 4% decline in units, partially offset by a 1% increase in price. ProWood saw a 3% decrease and Deckorators an 11% decline, with Deckorators' decline driven by a temporary customer shift. Packaging segment sales dropped 3% to $410 million, with a 3% decline in organic units and 1% decline in selling prices, offset by the C&L Wood Products acquisition. Gross profit in packaging decreased by $16 million, and gross margin declined by 316 basis points. Construction segment sales were largely flat at $516 million, with a 3% increase in volume offset by a 3% decline in selling prices. Gross profit for the segment decreased by $24 million year-over-year, and gross margin dropped 448 basis points.

• Business conditions impacting Q1 are expected to carry over for the remainder of 2025. Tariffs on Canadian lumber add headwinds, but the company is well-positioned. - Long-term targets include 7%-10% unit growth, 12.5% EBITDA margins, with the timeline pushed out due to the current economic environment but goals unchanged.

• Macroenvironmental uncertainty, including ongoing challenges in the construction and packaging segments. - Tariffs on Canadian lumber creating additional headwinds. - Difficulty in fully passing along higher input costs to customers in some segments, leading to margin pressure.

Q: Outlook on competitive dynamics and pricing pressures A: Mike Cole stated current challenges are expected to continue in future quarters, with packaging margins stabilizing but facing cost increase pass-through challenges, construction's site-built area remaining challenging, while retail expected to improve with benefits from Deckorators' more efficient capacity and price increases.\nQ: Lumber price management A: Will Schwartz mentioned the company does not want to give up market share and is managing margins, aiming to mitigate cost increases while retaining/growing market share. Mike Cole added the team makes good business decisions regarding market share based on variable costs.\nQ: Deckorators growth A: Will Schwartz said Q2 will see the completion of the load-in of new retail wins, with expectations of volume gains year-over-year by the end of the year and margin benefits from capital expenditures in the second half.\nQ: M&A opportunity A: Mike Cole noted the M&A pipeline is robust across all business units, and the company is open to both tuck-in and larger M&A deals, being disciplined on valuation. Will Schwartz added the company is open to larger transactions but remains disciplined on valuation and capital structure.\nQ: ProWood pricing A: Will Schwartz said price increases in ProWood have been passed along, and most margins are expected to normalize going forward.\nQ: ASX acquisition impact A: Will Schwartz stated the acquisition may cause disruption in two-step distribution, reinforcing the need to invest heavily in the company's own market access.\nQ: Concrete forming business A: Will Schwartz mentioned no substantial cancellations or slow-walking in the concrete forming business, with value-added products continuing to gain market share.